Sunday, August 31, 2014

The Axis is back

More BS amateur geopolitical thinking from yours truly.

In 2002, David Frum came up with one of the more boneheaded rhetorical blunders in American speechwriting history when he coined the term "Axis of Evil" to describe a motley collection of totally unrelated rogue states. Evil it was in varying degrees, but it was no Axis. The states were not allies, and two of them were actually bitter enemies. Nor did they pose any threat to the United States.

But while we were messing around in Iraq, babysitting Sunnis and Shiites, burning our international prestige with a blowtorch, and spending trillions, something very ominous was happening. The actual Axis - something very like the coalition we faced in World War 2 - was reconstituting itself, like some sort of demonic fantasy-novel creature that gets defeated and dispersed but never really dies.

Of course, I'm talking about Russia and China, which have occasionally been dubbed the "Axis of Authoritarianism", though Frum's boneheadedness has probably soured people on "Axis" nicknames for a while. But nevertheless, I think the analogy is apt.

What happened in World War 2 was basically this: Two small, powerful states (Germany and Japan) tried to conquer the large Asian land empires next to them (Russia and China) while those giga-empires were in a moment of weakness. Eventually the little guys would have lost, but the U.S. hastened that loss by intervening on behalf of the big countries. The U.S. conquered the Axis countries and reconstituted them as economically strong but military weak mostly-isolationist states, setting them up as buffers against the two now-very-pissed-off empires. The big empires, Russia and China, opted for a system (communism) that was economically non-viable in the long term but in the short term gave them organizational capacity that allowed them to repel external military threats (obviously this happened earlier in Russia). The system they adopted put them in ideological conflict with America, the country that had just saved their butts, and America won the ensuing ideological struggle when communism turned out to be a long-term loser. This outcome was hastened by a bitter split between Russia and China, which showed that shared ideology is never a guarantee of durable geopolitical friendship.

OK, that brings us to 2000. Post-Cold War, Russia and China have both adopted systems that look a little bit like the systems of the countries that whooped up on them in World War 2. Putin's Russia is a nationalist country that places a lot of emphasis on race, and scapegoats minorities like gays, while not really having an economic ideology - a little like Nazi Germany, but far less insane, and much more dependent on natural resource exports. China is now a bureaucratic directed-capitalist state with a strong independent confident military, a feeling of national resentment over past mistreatment by powers near and far, and a feeling that its destiny is to dominate East Asia - a little like Imperial Japan, though less beset by domestic terrorism.

Meanwhile, the strategies being used by Russia and China are a little similar to those used by the actual Axis. Russia is gobbling up co-ethnic neighboring states, much as Hitler gobbled Austria and the Sudetenland. China is bullying the neighbors (though not grabbing territory outright quite yet, as Japan did). And the two have formed a friendship of convenience rather than a strong cooperative alliance, much like Germany and Japan did in the Axis. The similarity is probably because Europe and East Asia each lends itself to a certain geopolitical power-building approach.

Ideologically, neither Russia nor China is interested in foisting a universalist ideology on the world - but neither were Nazi Germany or Imperial Japan. Hitler didn't want everyone to agree that Germans were racially superior, he just wanted people to bow to him and do what he said (or die, or both). Same with Japan. It wasn't until the Cold War that competing trans-national global ideology really came into play (though it had been in play in some other conflicts in history.) The new Axis is generally more authoritarian than its opponents, generally respects human rights less, generally favors less stable borders (despite Chinese B.S. rhetoric about national sovereignty), and is generally more militarily aggressive (Iraq notwithstanding). These characteristics are what make the Axis the Axis and the Allies the Allies. But that's not what the conflict is about.

What the conflict is about, is domination of Eurasia, the big continent. I don't know why countries want to dominate this landmass - it seems kind of dumb to me - but they do. This time instead of unusually tough periphery countries trying to conquer and replace the core, the big core countries have got their act together (more or less) and are ready to retake their "rightful" place as emperors of the big continent. Meanwhile the little countries on the periphery, in Europe, East Asia, and Southeast Asia, just want to be independent from the power of the core countries. The U.S., halfway around the world, tries to play balancer and stabilize everything. The "Axis" is just whoever is trying to dominate Eurasia this week, and the "Allies" are just the U.S. plus whoever in Eurasia would rather not be dominated. Until either A) everyone realizes that dominating the vast expanses of interior Asia is pointless, or B) those expanses become populated and economically self-sufficient and divided up into a bunch of stable countries, an Axis will periodically form, and be countered by some Allies.

So that's kind of how I see things. The Axis is, for all intents and purposes, back. That doesn't mean we need to fight it in an apocalyptic war like last time. In fact, that would be a singularly bad idea. With nukes now involved, the cost is way too high. But we are probably in for a protracted struggle, unless the big core Eurasian countries suffer another falling-out or suffer some kind of surprising internal collapse.

Natural resources are bad if your goal is to maximize per capita GDP in the long run, great if your goal is to sustain a small elite's grip on power via patronage (which is partly why they're bad for long run growth...). We're not talking about the strategies of "China" and "Russia," ultimately, but of the terrified elites currently in control of the state machinery in those places...

Russia may be going for a natural resource extraction based economy but China certainly doesn't seem to be. I think they're more worried about a major sea power (aka the US) being able to cut most of their trade off almost at a whim. That would actually imply somewhat aggressive military build up and maybe taking a few strategic points, but it's mostly a defensive posture meant to ensure Chinese policy independence.

China is not going for a natural resource extraction based economy, but that doesn't mean that natural resources aren't an important component of their foreign policy. Global dependence on China for resources such as rare earth minerals (in addition to their general importance in global trade) give the rest of the world an incentive to keep China stable (see: Maidan). Chinese reliance on energy imports represents a major weakness in potential worst-case geopolitical scenarios, and gaining access to the natural gas reserves in the South/East China Sea would help close this gap.

Still, the natural resources argument is obviously more debatable in the Chinese case compared to the Russian. I once had a debate with an IR professor over whether China's South/East China Sea posturing was actually about the resources at stake (my position), or a ploy to rouse nationalist sentiment to strengthen the political position of the army during a period of political transition (his position).

Also, the energy industry is a great opportunity to expand the role of state-owned enterprises in the economy at a time when SOE's are struggling to maintain their relevance in other areas of the economy. SOE's are an incredibly important tool re: patronage in the Chinese political system.

China and Russia are both thugish kleptocracies where losing a power struggle can mean death and elites try desperately to have their children escape to the West. Russia is so impossible as a place to do business that its largest business trades at a P/E of 2.7. The life expectancy for a man in Russia is 64. Not a strong foundation for regional domination.

If Russia wants to dominate the former USSR territories - no one else cares except for the Baltics. For most of the old USSR it would just be a fight between competing gangs of kleptocrats. The day Russia sends one of its military surrogates into one of the Baltic countries, the Baltic countries with help from their allies in Nato, will wipe out the invaders. The Danes and the Poles may finish the slaughter before Germans, Brits or Americans have time to get there.

China wants to be respected but has border disputes with all of its neighbors. It has had shooting wars with Russia, Vietnam and India over borders. It's neighbors are more commercial rivals than dependencies. The prospects of China dominating Korea, Japan, Vietnam and India are somewhere between slim and none.

The one dis-organized territory that would be up for grabs for the Chinese or Russians to dominate would be Afghanistan. Good luck to them with that. China has been reduced to trying to buy friends in Zimbabwe.

Russia and China need the rest of the world a lot more than the rest of the world needs them. That significantly limits the amount of mischief either one could cause.

I think this is a very weak comparison. You may as well compare Russia and China to Paraguay and Bolivia in the 19th century and achieve the same level of meaning--which is very little. I'm reading Fenby's Fall and Rise of a Great Power From 1850 to Present right now, and you know? China isn't really anything like either Germany or Japan of the 1930s.

When you talk industrial capitalist make-ups, do you *really* want to compare Russia with *either* Germany or Japan of the 1930s? Does Russia's desire for a set of buffer state have any sort of consanguinity to Nazi aspiration beyond Anschluss? And really? Does the Russian pursuit of a dismembered Ukraine have all that much to do with expansive and consolidating nationalism such that it's comparable to Sudentland or Austria? Lastly, in both Germany and Japan, lebensraum policies with ancillary genocide were favored. Aside from China's internal policy to the far West and SW, does either of them have ambition to clear out neighboring countries for the benefit of their own citizens?

You know that's beneath you. If that's all you can do, perhaps you should re-evaluate whether, maybe, just maybe, you mostly just wrote a paranoid rant with limited connection to reality, but waving WWII flags?

The big incorrect premise is the standard liberal internationalist one, that the US is the good guy who's fighting the bullies who want to dominate the world (or Eurasia, whatever). Statements like "The U.S., halfway around the world, tries to play balancer and stabilize everything." This has never been true. America's foreign policy is centred around two big interlocking goals: a) putting down populist movements all over the world that would end up keeping their nation/region's resources out of the hands of eager Western multinational businesses and instead with the people where it can benefit them, and b) winning big geopolitical questions, like in the Cold War, in order to keep the ability to pursue a).

So most of America's actions can be understood through this lens. Vietnam? It wasn't about "fighting global communism", it was about terrifying the peasants in the region out of their nationalist movements. Vietnam was a US success on this front. The burgeoning Indonesian nationalist movement at the time was totally crushed and Suharto ensured free US investment for decades after (at least until the IMF bailout of the mid-90s saved said Western investment at the expense of the Indonesian populace, causing Suharto to lose control - no matter, the profits were safe).

Latin America? Many the CIA financed coup has happened where a centre-left government gets elected on a platform of not totally giving away the farm to American business and suddenly finds itself on the wrong end up a rogue general. Salvador Allende comes to mind, but there are literally dozens of US interventions over the last 150-200 years in the region. Etc, etc, literally anywhere you go in the world the story is the same.

Lines like "Putin's Russia is a nationalist country that places a lot of emphasis on race, and scapegoats minorities like gays, while not really having an economic ideology" are a joke as they explain America just as well. It's a nationalist country that places a lot of emphasis on race and scapegoats minorities like immigrants, while not really having an economic ideology (if you believe that Free Markets stuff then take a look at Reagan's 100% tariffs on the Japanese high technology during the 80s that threatened the inferior American product).

This is kind of what infuriates me about boilerplate liberal analysis of history and geopolitics - it's so cocksure of being on Team Good Guy that it throws out literally centuries of history which, while not making America SuperHitler, certainly makes any moral high ground seem a lot lower than it would be otherwise. America runs an empire not terribly different from others in history, only it enforces its "territories" with financial instruments and only sends in soldiers if the various governors really screw up (Saddam learned that one first-hand). Of course, empires don't last forever, and I think we've seen the high water mark of this one already. Afghanistan and Iraq were a little like the America's Teutoberger Wald.

By the way, while I'm no fan of State Communism, two things should be noted: the USSR went from an impoverished peasant agrarian economy fresh off losing a war in 1917 to putting the first satellite into space in 1957, something that is rather amazing if all the stories about the inefficiencies of communism are to be taken at face value. Furthermore, the fall of the USSR two decades ago was less about the economic system's collapse and more about the elites recognizing that they'd make out far better under capitalism. Which they did, of course. Hapless shmucks like Jeffrey Sachs went over there thinking that privatization would bring joy and prosperity to the Russian people; what resulted was the worst period of time for said Russian people since the Nazis invaded. And that's no small part of why a strongman like Putin is in power today.

Hey, MDZX. I think you're missing the point a bit. One is that caring about business interests is perfectly consistent with playing the role of stabilizer. Stability is good for business. Lots of hegemonic powers have played this type of role throughout history - Ming China, for example.

My point is: America is more "good guy" than its more authoritarian opponents. But that has little to do with why the conflict arises. The conflict is just about power, money, security, etc. The fact that we happen to be a nicer, friendlier civilization than those others - and we do, whatever you may say - is just a coincidence.

I guess I should have been a little more clear. I honestly don't think I'm missing the point re: what I said at all. What you wrote that I objected to is a very common refrain, and I was into it too until I started looking up all the places America has bombed over the years and read a bit of what Gen. Smedley Butler etc had to say. I don't disagree with the rest of what you wrote, but the fact that conflict is about power, money, security, control over Eurasia, etc is basically a tautology - what else have big conflicts ever been about?

You aren't wrong when you say "caring about business interests is perfectly consistent with playing the role of stabilizer", sure it can be - but we can look at this empirically. How "stable" is the Middle East after the US invasions of Iraq and Afghanistan combined with the support for all sorts of rebels, mujahideen, dictators, Saudi dynasties, the destruction of oil-nationalization-threatening Iranian democracy in the 50s, etc? How "stable" was Southeast Asia after the massive US-instigated conflict in Vietnam as well as the secret and illegal bombings of Laos and Cambodia? How "stable" was Africa for a full two generations (it's only recovering now) as the US and USSR competed for the spoils of the old decaying European empires? No, while stability might be helpful and more intelligent a strategy in the long run, the US has acted to quash nationalist movements and thereby help out the short term interests of businesses like Exxon Mobil - or previously the famous United Fruit Company - despite predictable negative effects on "stability".

"America is more "good guy" than its more authoritarian opponents."

Undoubtedly true domestically. America despite all its "imperial" actions remains an unusually free and open state domestically as far as human history is concerned, though events like Ferguson and the mass arrests of OWS are showing that this era may be coming to a close (or maybe not - the repression of the labour unrest a century ago was far more bloody).

But leaving the country, a Chinese, Russian or American bomb dropped on innocents kills just the same, and American bombs have found innocent targets far more than either of the others, going back a very long time. Or is America nicer and friendlier because it uses massive agriculture subsidies and "free trade" agreements to wipe out the subsistence farmers of poor countries and force them into the factories of the Western investors who just happened to show up, instead of doing it by gunpoint?

Well, MDZX, I think we agree on a lot of points, though I think that free trade, on balance, is usually good for poor people in poor countries (though our agriculture subsidies reduce that benefit substantially).

As for whether or not America is a stabilizer, what I mean is that America has been very consistent about stabilizing international borders. Basically, America insists that no one's borders ever change. That is the kind of "stabilization" I was referring to.

Stabilizing borders? Really? That's really what matters to an economist? That determines who's a "good guy?" Borders are a subjective thing...if they were to be viewed in time series over even just the span of 100 years, they fluctuate like market prices. And in doing so convey information, just as prices do, about the relative supply/demand of territory, and military productivity of the border-shifters, etc.

Interesting post. One quibble: I'm not sure it's fair to say that the US saved Russia's butt in WWII. The US had a huge role to play in both direct military operations and in providing war materials for the war in Europe, but I always had the impression that, post summer of '41 anyway, the war in western Europe was a mere side show compared to the titanic struggle between totalitarian titans in eastern Europe and Russia. Total US casualties in both theaters (~420k) are a small fraction of even the uncertainty in the number of casualties suffered by the USSR (~25 million, give or take 3 million). Stalingrad alone produced about 2 million total causalities (on both sides, roughly evenly split). But the Russians didn't just absorb abuse: they dished it out. I'd guess they are the country most responsible for the Reich's ~5 million military casualties. True, the US and UK helped torch a lot of German civilians, but I'd be surprised if the Allies killed much more than a million German military personnel.

It's true that if we just count casualties, China is up there (10 to 20 million), but mostly they were the ones absorbing abuse from Japan, rather than dishing it out, weren't they? So a case could be made for the US "saving China's butt."

While "America Saves the Day" isn't accurate, neither is "Russia goes it alone". You cannot ignore the effect of Hitler keeping many elite troops in Western Europe or fighting in Africa, which helped the Russians -- the only Ally to fight a single-front war -- to deal such devastation. Moreover, it was American materiel support that kept the USSR in the game -- materiel so vast in quantity and so, well, adequate in quality, as to set the USSR up for its industrial survival when the war was over.

Tom: Yes. U.S. saved China's butt a lot more than Russia's. China was in the middle of a civil war, so it would have taken much longer to eject Japan had the U.S. not intervened (they would have eventually done it, though).

Russia was a close-run thing. Had Hitler broken through and taken Moscow and the major western cities, it's conceivable the war would have lasted much longer. As gilroy0 pointed out, U.S. aid was pretty helpful in helping the Russians survive the initial German onslaught:http://www.historynet.com/russias-life-saver-lend-lease-aid-to-the-ussr-in-world-war-ii-book-review.htm

But yeah, I was just being glib. The U.S. didn't save Russia's butt to the degree it saved China's.

gilroy0 & Noah: Thanks. No disagreements really. I realize about the material, in fact I mentioned it. But perhaps I'm underestimating it. Certainly we helped save the UK's butt: winning the Battle of the Atlantic benefited both the UK and Russia I suppose, but probably mostly the UK.

Still the Russians were the ones cranking out T-34s in Siberia, not the US.

As an aside, one thing that I always find morally strange (about myself, and my fellow Americans)... we get morally outraged about killing civilians in certain ways. More recently we've been more concerned with eliminating "collateral damage" in our wars ... but still, looking back on WWII I'll bet most of us have *relatively* little problem with the US (and UK) having literally incinerated tons of (millions?) German and Japanese civilians with strategic bombing... yet setting up death camps to kill them with gas, or freezing, starving and working them to death in gulags, or even just raping or enslaving them... that's somehow substantially more repugnant to us (me included!... but it doesn't make any sense, does it?).

Well, the people doing it did have plenty of reservations about it, check out this clip where Robert MacNamara breaks into tears and calls himself a war criminal: https://www.youtube.com/watch?v=fDT8NdyoWfI

Some authors (Victor Suvorov, Mark Solonin) have a different view about WWII on the eastern front - they attribute the early German successes as being due to a successful pre-preemptive invasion. Essentially the Soviets were preparing to conquer Europe at almost the same time and had lined up their troops at the border, leaving them very vulnerable and unprepared for defense.

Since the USSR was totally committed to arming since at least 1928 (Germany since 1933 and being a much smaller country in population and territory) if not earlier, it is not surprising that being the bigger country won, even thought it had a pretty bad run in the beginning.

Soviet historians tried to mask the Soviet aggressive side by creating multiple myths that portray USSR as basically a peaceful country responding to aggression, while it was just as bent on conquest as Germany, Italy or Japan.

An interesting point from Chinese history is that while it was definitely an empire it hasn't been imperialist since the Han - it never tried to conquer Japan, India or South-East Asia. It did conquer Korea and Vietnam earlier and can argue that conflicts with those nations were carried over an earlier period. As far as I know the Chinese prefered having nearby lands being vassal rather than conquered.

Now anyone with more knowledge about Chinese history can correct me and should...

Re Diaoyu/Senkaku - I suggest the best way to deal with this is through a Texas shoot out. Each country should out in a sealed bid to buy out the other country's claim or be bought out by the other party. The island then goes to the country that values it the most.

Japan could do similar deals with South Korea and Russia to resolve its territorial disputes with those countries.

It also strikes me, as a reasonable analogy, that Europe/NATO is like Germany in WW2 trying to push its boundaries east to Moscow through Ukraine, while the US is like Japan, trying to dominate East Asia. So is Europe/US/NATO really the Axis countries of today? Hmmm ...

The Europe analogy could work, since fully joining the EU does involve some loss of sovereignty. But in Asia the analogy doesn't seem to work, since the U.S. doesn't want to take any territory; China does.

Europe nor NATO are not trying to push anything. Russia's neighbors are all running West because being dominated by primitive savages kept afloat but oil/gas rents for 50 years was enough to realize its a dead end.

I just see Russia as pushing back against the constant encroachment by NATO from the east. They have oil and gas but have to sell it to Europe.

The Chinese Communist Party is in a symbiotic relationship with multinational corporations, especially American ones. They depend upon their exporters selling products to the American consumer market and American corporations take a large cut. Instead of subsidizing their exporters, they should allow more wage gains and domestic spending. But then they'll have to manage a trick transition to democracy.

"Two small, powerful states (Germany and Japan) tried to conquer the large Asian land empires next to them (Russia and China) while those giga-empires were in a moment of weakness. Eventually the little guys would have lost"

what make you think eventually the little guys would have lost? Britain Won. So Japan could have won if America did not intervene.

Without the US entering the war, I think that Japan would have eventually been forced out China, but they may have been able to hold on to Korea and SE Asia. And I am pretty sure the Japanese could have held on to the Islands of their empire. With Japan's navy intact no other power would have been able to challenge them in the Pacific.

Japan plus the Philippines, Taiwan, Hainan and much of Indonesia would still be still quite an empire.

I like that you've pointed out that a point of similarity between the Axis is how unsteady and unreliable the relationship in that camp is.

A major weakness is that Russia and China kinda sucks at making allies, especially taking advantage of natural ones (countries with compatible interests, not just the same enemies for the time being).

The Eurasion Union is already looking like a failure with Belarus and Kazahstan hinting they can leave if they want to and Russia forcing its interests on them at every term (and Ukraine before Euromaidan). From a trade perspective it is is not really a free-trade area, but rather Russian rules area - the big country often bans products from the small ones.

China is interested in Russia only insofar it sees an opportunity to get great deals on resources and weaponry at cheap rates. They did have a war in the 60s which is like yesterday in those countries; they are not reliable alies and will not back each other - China hasn't recognized the annexation of Crimea for example.

In the beginning of this post, you admit that this is a highly speculative text. And this got me wondering, why is it that rigorous thinkers like yourself seem to throw all restraint out the window when talking about geopolitics. I understand that we do not all want to be rigorous all the time, but considering that you have a large and perhaps influential audience, this should be the kind of subject where you'd refrain from admitted BS. You'd never make such categorical affirmations about the business cycle. And if you think that macroeconomics is in bad shape as a theory, then international relations theory (at least the sort of "realist" analysis you seem to be doing here) is close to alchemy. Why would you cast as an almost certain enemy a country with almost twenty percent of the world's population and the second largest trading partner to your country? China has conducted several reforms and hasn't fought a war in a very long time. Doesn't this count as evidence that there could be a different outcome? Wouldn't you demand much more solid theory and evidence if this was economics?

Maybe Noah is being careless in categorizing China as an enemy, but one need only read the popular press to understand that the U.S. has for quite some time been making strategic military alliances with nations throughout Asia, all with an eye toward the impact those alliances will have on the behavior of China. Noah even goes so far as to say that fighting a war with either Russia or China would be a monumentally bad idea. However, it does seem as if the U.S and China have competing interests; if they didn't, the U.S wouldn't be putting in military bases in Australia or conducting joint military operations with countries like Indonesia.

Well said Anonymous (11.27AM). This is worse than dinosaur s***. Why this hate-mongering vis-a-vis China/Russia is not clear. Please stick to your macroeconomics blogs, which are lot more informative than your geo-political DS.